Inflation slows on lower fruit, spice prices

New Delhi: India’s inflation rate slowed for a second week as prices of fruits, vegetables and spices fell, reducing the chances of the central bank raising interest rates anytime soon.

The key wholesale price index was 5.66% in the week ended 28 April, from 5.77% in the previous week, the Ministry of Commerce &amp; Industry said in a statement in New Delhi today. Analysts forecast inflation at 5.75%.

The Reserve Bank of India expects inflation to slow to 5% by 31 March after it raised interest rates nine times since October 2004 to damp consumer demand for manufactured goods. The central bank may be approaching the end of its policy of raising rates, nine of 11 analysts in a Bloomberg News survey said last month.

“Inflation will moderate in the coming weeks because of the steps taken by the central bank and the government,” said Anjan Roy an economist with the New Delhi-based Federation of Indian Chamber of Commerce and Industry said. “I don’t expect the central bank to raise interest rates anytime soon.”

Finance Minister Palaniappan Chidambaram has since January cut import taxes on cement, wheat, pulses, and reduced prices of gasoline and diesel to help slow price gains.

The yield on the benchmark 8.07% note due January 2017 rose 3 basis points, or 0.03 percentage point, to 8.15% as of 12:20 pm in Mumbai, according to the central bank’s trading system. The yield was little changed after the inflation announcement. The price, which moves opposite to yield fell 0.17, or 17 paise per Rs100 face value, to Rs99.46.

The government also started importing wheat and has halted the export of lentils to check prices.

The government today revised the inflation rate for the week ended 3 March to 6.51% from 6.46%. The government revises the inflation rate after a delay of two months on additional price data.